Carlyle forced to pump £100m into newly floated UK offshoot

A Guernsey-based mortgage investment offshoot of the private equity firm Carlyle has been forced to seek a $200m (£100m) lifeline from its US parent as it struggles to meet commitments to its lenders.

Carlyle Capital Corporation, which has $22.7bn largely tied up in mortgage-backed securities, raised $322m only last month by floating on the Amsterdam-based Euronext exchange. Disgruntled clients have accused it of failing to keep them informed of events.

In an open letter to investors yesterday, John Stomber, chief executive, said a liquidity squeeze across markets was worse than the crisis caused by Long-Term Capital Management's demise in 1998.

Because its investments are worth less, the Channel Islands firm's lenders have demanded extra collateral. To meet these requirements, it has offloaded 5% of its assets for $900m - at a loss of up to $40m. Its Washington-based parent, Carlyle Group, has lent $100m in seven days to help it meet commitments.

Mr Stomber told investors in a letter: "We designed CCC's business model to withstand a liquidity event equal to the events of October 1998, when the demise of Long-Term Capital Management threatened the financial markets. We believe the recent liquidity disruption is significantly worse than the events of 1998."

Carlyle Capital joins a long list of institutions pummelled by the collapse of the US sub-prime mortgage industry. Kohlberg Kravis Roberts, Carlyle's private equity rival, has seen a similar liability develop at its offshoot KKR Financial Holdings.

Wall Street banks, including Goldman Sachs and Bear Stearns, have injected funds to prop up their hedge funds. Reports in the US yesterday suggested that another American bank, State Street, has seen the value of a bond fund collapse by 37% in three weeks.

Carlyle Capital's problems are likely to infuriate investors who bought shares at $19 in a flotation in July. By yesterday, the shares had fallen to $14.95. In his letter, Mr Stomber acknowledged that the firm's communication of its problems may have been "unsatisfactory and frustrating".

Prior to its public offering, Carlyle Capital insisted that it specialised in triple-A rated securities and was "as far away from sub-prime as you can possibly get".